The Ontario Securities Commission released a paper today intended to initiate a broad consultative process to consider a number of potential new capital raising prospectus exemptions.
Specifically, the consultation paper canvasses the exemptions currently available in various jurisdictions, including the U.S., Australia and the U.K. These exemptions are generally based on (i) investor attributes (such as income and financial assets); (ii) relationships with the issuer (such as the family, friends and business associates exemption available in jurisdictions other than Ontario); (iii) investment size (such as Ontario's $150,000 minimum investment amount exemption); (iv) disclosure; (v) "crowdfunding"; and (vi) offering size.
With respect to "crowdfunding" (which is the popular term for funding a project or venture through small amounts of money raised from a large number of people over the internet via an internet portal intermediary), the potential for an exemption is examined using the provisions of the U.S. JOBS Act as a basis for discussion. Issues considered include issuer restrictions, investor protection measures, and the registration of funding portals. The paper also explores a potential OM exemption (which, unlike other Canadian jurisdictions, is not available in Ontario under NI 45-106) with a $1.5 million limit on the amount of capital that could be raised by an issuer in a 12-month period and a limit on a purchaser's annual investment of $10,000. The concept OM exemption is not intended to be a recommendation and was provided by the OSC for discussion purposes.
Ultimately, the paper recognizes that a desire to increase access to capital for issuers and to increase investment opportunities must be balanced with the need to protect investors. The paper thus acts a number of specific questions regarding the various options being considered, and the OSC states that no decisions will be made without "broad public consultation and discussion." According to the OSC, the paper is an initial step in the public solicitation process.
As we've discussed previously, the OSC has been reviewing the accredited investor and other exemptions for some time. Meanwhile, the introduction of crowdfunding in the U.S. has prompted considerable discussion among stakeholders and in the media with respect to the opportunities and challenges of adopting similar policies domestically.
Ultimately, while the paper demonstrates that regulators may be willing to consider various options to increase the availability of capital, it is yet unclear whether any new exemptions will be adopted. Comments are being accepted until February 12, 2013.
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